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The Whys and Hows of Comparing Car Insurance Rates

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Cars are not cheap to buy and they’re certainly not cheap to run. It can be tempting to skimp even on necessities like tires and oil changes – please don’t do this, though: these expenses are real investments, both in your car’s future value and your personal safety.

Insurance is another kind of investment masquerading as an unwanted but necessary evil, specifically, a hedge. It is, in other words, not intended to make you money, but a tool prevents you from losing any if something bad should happen. If you want to pay less, by all means, compare car insurance rates, but make very sure you’re never caught with insufficient coverage.

How Anyone Can Get More Affordable Auto Insurance Rates

Before we get to the meat of how car insurance prices are calculated and what you can do in order to get a better deal, let’s go over some basic hints and tricks that anyone looking for a better rate can make use of:

Never Auto-Renew

You would think that a company you’ve paid money to for years appreciates your loyalty and will gladly offer you the best rates in order to keep your business. Hahhaha! Their ads may say something of the sort, but their policies are usually quite different.

Insurance companies rely on existing clients being too lazy, busy or indifferent to do an auto insurance quotes comparison every year. New clients, by contrast, are lured in with all kinds of special offers and bonuses. Assuming that you keep a calendar, make sure that the auto-renewal or expiration date of your policies are penciled in; the best car insurance comparison websites take literally minutes to show you what you could be paying instead. In fact, you don’t even have to wait until your current coverage runs out – you can cancel most insurance contracts any time you feel the price is not right.

Ask for a Higher Deductible

An insurance deductible, of course, is the amount of money you’ll have to pay before the insurer will step in and cover the rest, or at least up to the limit for whatever category is involved. This is agreed on when the contract is drawn up and typically ranges from $250 to $1,000.

While there are other ways to think about this, you may want to go for the highest deductible you think you’ll be able to afford out of pocket. This essentially shows the insurance broker that you’re not planning on getting into an accident and aren’t likely to file minor claims, thus reducing your monthly premium. Essentially, you’re trading an uncomfortable but unlikely expense for a more manageable but certain one. On a related note, since auto insurance really isn’t optional anyway, pay off the full policy at once, if you can, and receive an immediate discount compared to choosing a monthly schedule.

Shop Around – And Not Just by Provider

Premium amounts sometimes vary without any rhyme or reason – you may, for instance, find that you pay less for full coverage than a less comprehensive policy, all depending on how some actuarial computer interprets your application. If you’re partially or fully self-employed, you may get a better overall deal by designating your car as a commercial vehicle, or the other way around. Adding a second or third driver, as long as they have a favorable claim history, can save a bundle even if you’re still the primary driver. Making sure the insurance company’s application checker knows that your car is typically parked indoors, or at least on a fenced site, is almost certain to get you at least a discount on theft coverage.

There are websites that provide online car insurance quotes without personal information being required; feel free to play around with these to your heart’s content. A word of caution, though: never make stuff up when it comes to actually sign a contract. The person rubber-stamping it will probably not check up on every detail, but the adjuster will do so if you make a large claim.

How Are Car Insurance Rates Calculated?

If you ask around, you’ll probably find that very similar people driving the same cars may see completely different rates for their car insurance. Some of this can be explained by one individual being a little smarter, perhaps buying auto insurance online with their checking account rather than visiting whichever storefront office is closest to his home. Aside from this, there are a number of predominant factors that determine any given person’s premium, some less obvious than others:

  • Age and Gender

This may seem unfair, but it’s simply a fact that the groups most likely to be involved in accidents are young males and older women. In general, women are more careful drivers, while people who’ve been on the road for some time have more experience at not crashing into things or being crashed into.

  • Zip Code

Again, a factor that’s not really under your control, but the statistics on accidents, theft and other mishaps vary significantly by location. People in poorer areas or those with high traffic volumes have to pay more to insure the same car.

  • Your Car

Apart from more expensive cars requiring higher policy limits, newer cars are safer, as are certain models. Cars that have been in major accidents and also (interestingly enough) those with more muscular engines are seen as higher risks.

  • Driving Habits

People who’ve had accidents before, or who’ve amassed a ton of speeding tickets, will definitely struggle to qualify for the lowest rates. The same is true for people who cover a lot of highway in a month. There is some good news, though: many insurance companies offer a discount to people who have completed a defensive driving course, while others will lower the premiums of people who use a special device or app that monitors their behavior behind the wheel.

compare car insurance rates calc
Insurance finance accounting

A few other factors that indicate a person’s financial stability and a general sense of responsibility may come into play, but not all insurers take these into account and many don’t even ask. Someone who owns their own home or has a high level of education may pay slightly less, while someone with a criminal record, and sometimes even unmarried people, may have to fork over somewhat more.

Comparing Auto Insurance Quotes, Step by Step

Get Your Info in Place

Either a quote comparison service or the insurer they recommend will ask for most or all of the following information, so taking a moment to put it all together and make sure it’s accurate actually saves time:

  • Personal Details: Since most auto insurance policies have multiple drivers listed, you’ll need the full name, date of birth, social security number, address and job title of each person. Every member of your household is usually assumed to be included in your policy unless specified otherwise.
  • Vehicle Details: The VIN number (which allows insurers to look up information such as which accidents the car has been in), mileage, make, model and year. Color, despite a popular misconception, usually doesn’t play any role.
  • Vehicle and Driver History: Many insurers won’t need to ask for a complete list of claims you’ve made in the past or traffic tickets you’ve amassed, but it doesn’t hurt to have this on hand. At a minimum, you should know which auto insurers you and any other covered drivers use or have used.

Decide on a Type of Policy

Next, you should figure out the minimum level of coverage you need – you can always choose a broader policy later if you find you can afford it. When insuring a rusty old clunker you can afford to write off, you might choose to get only basic liability cover. (Without this you can’t, in most states, legally be on the road anyway). Assuming that the limit amount is sufficient, this will prevent you from getting sued for any damages and injuries you cause in an accident, with the notable exception of those to your car and person.

When it comes to liability coverage, it’s always better to aim for a limit as high as possible instead of the legally required minimum: considering that the average cost of a root canal is around $1,000, you really don’t want to pay the hospital bills for someone who gets seriously hurt in a crash. Since Murphy’s law dictates that, if you do ever lose control of your vehicle, there will probably be a Ferrari in the way, the importance of a good liability policy can hardly be overstated – even if you’d prefer to spend next to nothing on insurance.

If you can’t afford to replace or repair the car by yourself at any time, you will probably want to look at collision insurance too, which will pay for some or all of any necessary work even if you’re at fault in a crash. If you lease rather than own your car, at least this level of coverage will probably be a requirement.

Comprehensive cover, for its part, generally covers the theft of the vehicle, too, and even damage caused by extreme weather. These are only general classes of policy, though, meaning that you might have to delve into each offer’s finer print if you have a particular concern. Many insurers, for instance, only cover damage or theft of personal possessions in the vehicle as an optional add-on, pushing up the total premium.

The Best Places to Compare Car Insurance Quotes

There are basically three ways to gather auto insurance quotes for comparison: through an independent broker, by phoning up or emailing at least three insurance companies, and online. Using a broker usually costs more, since they are professionals who work on commission. However, at the very least you can expect one to recommend exactly the type of coverage you need. They’re also ethically obligated to be impartial in their endorsements: even if they have a long-time relationship with a top-rated life insurance company whose car policies aren’t attractive, they will guide you to someone else.

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Counter / Photo from the Seattle Municipal Archives

Contacting insurance companies individually is basically a fool’s errand: not only will you have to provide all of your information every time, but you’ll also probably have to sit through a ton of sales talk, misinformation, and general bamboozlement.

This leaves online services, which are free to use and can refer you to any of dozens of insurers. Unless you have some unusual requirements for your policy (business liability insurance, combining multiple policies, insuring a car for use as an Uber or Lyft), this is the best way to compare auto insurance rates. While different insurers often give very different quotes on the same policy, the boilerplate contract is used in 99% of cases, with only the driver’s personal details, vehicle information and financial specifics varying.

This means that, when using an online quote lookup service, you only have to enter all this information once, then click a button to see multiple competitive rate options. None of these should be taken as legally binding, but they tend to be pretty accurate, and since information such as the deductible and coverage amounts will be the same for all of them, a meaningful side-by-side comparison is easy to do. At this point, you can visit the website of the insurer itself and even buy auto insurance online with a checking account the same day.

Location, Location, Location: Auto Insurance Rates by State

While auto insurance quotes comparison will probably not be enough to cause you to move a thousand miles, you might be surprised at how much car insurance costs differ across the various parts of the U.S.A. Reasons for this include regional weather, how many drivers in each state are improperly insured and the level of urbanization.

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Don’t, however, read too much into these average figures when looking at the quotations you receive. In the first place, insurers calculate car insurance rates by zip code, not just state. Someone living in a rural area will usually still get a better deal than a city dweller. Secondly, states where more people drive expensive cars, or where the minimum requirement for liability insurance is higher, will naturally have a higher average number.

In any case, the amount you are quoted will almost certainly be significantly higher or lower than what you see on the map above. Insurance companies take a wide range of factors into account when deciding to insure a client, some of which are under your control and others are not.

Credit Scores: Do They Affect Car Insurance Rates?

Except in a very few states where car insurance quotes without credit checks are the norm, insurance companies can and do pull information on your financial history. The extent to which state law allows them to let this influence their pricing varies by location, significantly:

compare car insurance rates credit1

This means that people who are already in financial distress can expect to pay more for auto insurance. On the sunnier side, if your credit score has improved in the last few months, there’s a very good chance you can save some money fast by looking at a few vehicle comparisons side by side.

The best advice for someone with credit problems is probably to look at insurance premiums as only one of several financial obligations, including the car payments themselves. If you can fit all of these into your monthly budget, you shouldn’t have any problem covering all your expenses, while consistently paying your premiums will help slightly in improving your credit score over time.

Which Insurance Providers Work Best for Young Drivers?

The typical teen wants nothing more than the independence of driving themselves around; unfortunately, most of them seem to think that they’re superheroes. This poses a problem for insurance companies and parents both: people under the age of 25 are the most likely to get into avoidable accidents.

First-time drivers also have no credit rating nor track record on the road to help insurers determine their risk profile – once they turn 20 and have not yet caused an accident, their premiums drop considerably. The good news is that, while they are still learning the ropes as student drivers, they are covered by their parents’ policy until they pass their road tests. You will have to add them to the policy, but this has little to no effect on rates or payouts (as long as you stay within the constraints of a learner’s permit, of course).

Once a young adult has their license, it may be best to retain them on the family policy, at least until they have a few years’ driving history of their own. This spreads the increased risk over multiple people and may involve a multiple-car policy discount, decreasing the rate for the family as a whole. If a younger driver has to take out their own insurance, which is often the case when they’re living alone, Geico, Nationwide and (for qualifying military families) USAA are almost certainly the best options. In many cases, you can qualify for further discounts based on anything from getting high grades in school to attending driving courses. You’ll be very, very happy to receive these, as the following map of typical annual premiums for an 18-year-old driver (who opts for only basic liability insurance) shows:

compare car insurance rates student1

How Driving History Affects Car Insurance Rates

If you look through your auto insurance contract carefully (and who, of course, doesn’t like to spend a Saturday evening doing just that), you might be surprised to discover that your provider can actually cancel your policy if they consider you to be too much of a danger on the road. This is fortunately rare unless the state actually suspends your license; most often, a DUI, speeding ticket or at-fault accident will only cause your rate to increase when your policy comes up for renewal.

Each insurance company uses a point system, similar to that applied by the DMV, to determine how much this increase will be. Every insurer has its own scheme, and how exactly this work is difficult to understand, but this should probably be the last thing on your mind before deciding to drink and drive in any case.

What you can be certain of is that any infraction of the rules of the road is going to cost you over the coming months and years – a lot. On average, you can expect your premiums to increase roughly according to the table below (accidents and other claims are usually evaluated on a case-by-case basis). If this should happen to you, it might be a good time to see if auto insurance quotes comparison can save you some money.

Overall, it seems like Nationwide and Liberty Mutual have the most forgiving policies when it comes to irresponsible behavior, though you’ll still be extremely lucky to be offered a rate as good as your former one. There is some good news, though: violations have a half-life as far as insurers are concerned, so you probably won’t be penalized for having had a single minor fender-bender a decade ago.

Type of Citation Percentage Increase
Speeding 25%
Open Alcohol Container 40%
Reckless Driving 61%
DUI 76%

Do Cars with Higher Prices Always Cost More to Insure?

One would think that the actual, physical vehicle to be insured would be a thing that mainly determines your auto insurance rate, but as we’ve seen, this makes up only a small part of a pretty complicated formula. The main impact your make and model of car has on the whole equation is its market value, i.e. how much it would cost the insurer to replace it if it were stolen or totaled. This is assuming you have a comprehensive policy: liability insurance is not optional, and it remains basically the same whatever you drive.

A whole bunch of other factors come into play too: a car that has been seriously damaged and repaired is worth less, for instance, but may cost more to insure. What insurers are mainly interested in, though, are the statistics of each model, including how likely each is (historically) to crash, the average repair cost and how likely it is that someone gets hurt.

The following values are all based on a hypothetical person who is average in every respect and was calculated in 2019. When asking around for quotes, you’ll probably find not only that the offers you receive are very different from those below, but that the rates offered by different insurers can differ by 50% or more. This is why the best car insurance comparison websites will show you at least half a dozen quotes: so you know you have options.

compare car insurance rates cars
Examples of car insurance rates

These figures are surprising, aren’t they? In general, more expensive cars come with a higher insurance price tag. However, this is only tacked on after their third-party liability risk has been calculated, while newer models’ advanced safety features may reduce this. Furthermore, certain models of cars are more frequently bought by relatively aggressive drivers, a statistic that increases their premiums even if it’s not applicable in any particular case.

Final Words

If you’ve read through all of the above, you now know that anyone who takes the first auto insurance policy offered to them is a fool. Each insurance company calculates premiums in its own way, and the results often differ hugely – even for the exact same person driving the exact same car.

It used to be the case that these businesses could do almost whatever they wanted: nobody really understood how they worked, competition was limited and people tended to go with whichever brand they knew without looking for alternatives. Now, it is not only possible but easy to buy auto insurance online with a checking account, choosing whichever option saves you the most money. This is probably the biggest shake-up the insurance industry has seen since the invention of computerized number-crunching, and so far it’s working out all to the benefit of ordinary consumers.

Frequently Asked Questions

Who offers the cheapest auto insurance?

There is no single answer to this question. Many factors affect the final price of your car insurance. Some of these include sex, location, and driving history. Still, online websites are the simplest way to find and compare multiple quotes.

How do I get the best insurance rates?

Three steps can lead to better car insurance rates. The first is to never auto-renew. Next comes asking for a higher deductible. Finally, make sure to ask for offers from several different providers. Don’t just get the first car insurance offered to you. Instead, do research and compare prices first.

How much is average car insurance?

Credit score, vehicle value, location, and several other factors determine the car insurance cost. So, it’s impossible to tell what the average price of car insurance for you is going to be. Generally, the annual average cost of car insurance in the US moves around $1,500. The lowest premiums move around the $1,000 mark, while the most expensive ones go up to $2,300.


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    14 thoughts on “The Whys and Hows of Comparing Car Insurance Rates

    1. tony7 says:

      What is the best car insurance for students? I need the cheapest provider

      1. Jessica says:

        Hello, Tony!

        Geico, Nationwide and USAA are certainly the best options for students.

    2. Mike says:

      Automobile insurance rates can be so high! I definitely recommend shopping around for the best rates and coverage policies. I was shocked when I went to purchase car insurance for the first time. Luckily, this article seems to clarify many misconceptions and makes the process less intimidating. Don’t be afraid to shop around!

      1. Jessica says:

        Thanks for your advice, Mike!

    3. Rob says:

      So hard to choose but I must do that. Thanks for your help, Jessi

      1. Jessica says:

        Of course, you can!

        If you have any questions, feel free to ask us.

    4. George says:

      When looking around for car insurance quotes, I came across this article and am definitely better for it. Lots of great info in one place, from the factors that go into rates to whether you buy or lease a car ( to the quickest way to get a car insurance quote and shop around. Worth bookmarking for sure!

      1. Jessica says:

        Wow! Thank you very much, George!

    5. M1K says:

      I’m actually driving without insurance right now, so this info was super helpful. I know I need to get that addressed, but last time I shopped for it, they refused to answer straightforward questions about what would lower my monthly premiums. The comments about deductibles, zip codes, etc. were exactly what I needed to know. Hopefully when I go shopping again, I’ll feel more empowered about making a car insurance comparison with the right information.

      1. Jessica says:

        You have to order car insurance. Also, if you have any questions you can easily contact us!

    6. Phil says:

      Wow! Everything you wanted to know about car insurance but were afraid to ask…Whether you’re looking to get the best car insurance rates for your vehicle or searching for info on what liability is, how rates are different from state to state, or which companies are the best, it’s all here in this easy-to-understand, detailed article!

      1. Jessica says:

        I appreciate your thoughtfulness, you’ve made my day!

    7. Lloyd Paul says:

      My trick for getting the best car insurance rates is contacting multiple providers and offers. Make sure to mention a competitor and magic happens!

      1. Jessica says:

        Agree with you, thanks!

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